Commercial fundraisers: Read before you give

Commercial fundraisers collected $338.5 million for California charities in 2011. The charities' share of that haul: $172.8 million, or 51 percent.

That's an improvement over 2010, when charities got just 44 percent of what was raised in their name by paid fundraisers, California Attorney General Kamala Harris says in a new report.

Most charities raise the vast majority of their money in other ways — through traditional in-house fundraising, memberships or fees for services at nonprofit colleges, art galleries or hospitals. Established charities that use paid fundraisers typically do so to fill in gaps in their business plans.

However, a handful, like the infamous Santa Ana-based Association for Firefighters and Paramedics, depend exclusively on paid fundraisers who take almost all of the money they raise. (Keep reading for tips on how to find the most reputable charities.)

The AFP paid $100,000 in 2010 to settle a lawsuit by then-Attorney General Jerry Brown, who said board members had diverted $33,000 for meetings in San Diego and Las Vegas plus a Caribbean cruise for board members and their families. AFP says it raises money for survivors of catastrophic fires.

In 2011, its first full year under the settlement, AFP reported raising $258,211 and netting $28,399 in California — an 11 percent return.

We called AFP Executive Director Michael Gamboa, but our conversation was brief:

"I have no interest in speaking with you," he said.

AFP is the last survivor in Orange County of a once-thriving group that raised tens of millions of dollars each year through phone solicitations nationwide. The group was founded by Mitch Gold, who lived large — Jaguar, Ferrari Testarossa, hilltop home in San Juan Capistrano — until he was sentenced to federal prison for fraud in 2001.

Gold's right-hand man, disbarred attorney, convicted felon and failed parricide Joe Shambaugh, set up four charities in Orange County early in the last decade. The Federal Trade Commission shut down three of them in 2009 for misleading donors after a fourth had closed.

Shambaugh is scheduled to be sentenced to five to 10 years in prison on Dec. 21 on his guilty plea to wire fraud for misleading donors in the charities' solicitations.

For most charities, commercial fundraising is a tiny slice of their money-making operation.

Friends of Santa Ana Zoo, like many membership groups, has a chronic problem getting members to renew. Just 30 percent of its 6,000 members renew each year.

First it sends those members an email, Executive Director Cathi Decker said. Then it sends a letter.

If those tactics fail, it contracts with Comnet Marketing Group to call the member and ask for a $70 renewal. Comnet gets a percentage of each renewal.

Result in 2011: $13,855 raised, $3,266 net to Friends of the Zoo, less than a 24 percent return.

Comnet probably gets people "who would (otherwise) drop out," Decker said. "But hopefully we can get them to re-engage."

Friends of Santa Ana Zoo received $623,000 in contributions and just under $1.4 million in total revenue last year. It provides funding for educational programs, community events and maintenance at the city-owned zoo.

Comnet works for several other nonprofits in California including the zoos in Oakland and Sacramento, the KCRW Foundation, which supports the Santa Monica public radio station, and the San Francisco Museum of Modern Art, according to the attorney general's report.

Cypress College Foundation, which raises about $650,000 annually for scholarships, hired the Gavel Group of Lake Forest last year to manage an auction at its annual gala.

Result: $46,844 raised, $30,778.50 net to the foundation, a return of almost 60 percent.

Foundation director Raul Alvarez thinks this is a pretty good deal:

"One, we make more money," he said. "Two, they do all the work."

When the foundation was conducting the auction on its own, using volunteers, "we got 100 percent of $15,000," Alvarez said.

Still he thinks the foundation can do better. This year he's hiring another another company to handle the auction.

Several nationally prominent nonprofits use commercial fundraisers in California to raise a portion of their money. Some examples:

Habitat for Humanity, the group that builds homes for the poor, made famous by former President Jimmy Carter. It reported six commercial fundraising campaigns in California, netting from 91 percent to nothing for the charity.

Heifer International, whose gift catalog invites American donors to buy cows and pigs for Third World families. It reported two commercial campaigns in California netting 60 percent and 82 percent for the charity.

Nature Conservancy, which buys and manages millions of acres of ecologically valuable land. It reported three commercial campaigns in California, two for less than a thousand dollars and the third a big money-loser. That third campaign raised $1.3 million but cost the charity a net $158,000 for a loss of 12 percent.

The holiday season is a peak time for giving. Here are a few wise-giving tips from the Watchdog:

Give like you're making an investment. Ask about the charity's finances and mission. Reputable charities will be happy to answer your questions or send you information. If they put you off, they just want your money.

Remember that it costs money to raise money. A letter costs more than an email, and a phone call costs a lot more than a letter. If someone calls asking for money for charity, ask if he's paid. Ask how much of your donation will go to the charity. If the answer is 100 percent, hang up — because you've just been told a lie.

Avoid giving cash; it's too easy to steal.

Avoid giving your credit card number to telephone solicitors.

There are many places to check up on charities. Two of our favorites are GuideStar (free registration required) and Charity Navigator. If you're willing to dive into numbers, you can download thousands of annual financial reports for free at the attorney general's Charity Research Tool.

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